MI Retirees Seek to Recoup Pension Loss

March 7, 2005 (PLANSPONSOR.com) - After losing $3
million in a pension fund investment, the Bay City (Michigan)
Police and Fire Retirees Association has sued its pension
board and its investment manager in an effort to recoup its
losses.

A news report in the Bay City Times said that the
dispute started in 2002 when money manager Asset
Strategies Portfolio Services recommended and the Bay
City Police and Fire Retirement System Board of Trustees
approved giving Advance System Management a $10 million
mandate.

Officials pulled back the investment six months
later after suffering the $3 million loss, the news
report said. The Retirees Association wants $3 million in
damages and to have Asset Strategies removed as the
fund’s money manager.

“They used extremely poor judgment,” attorney Kim
Higgs, who is representing the retirees association, told
the newspaper. “You don’t take these kind of risks with
people’s retirement funds.” At the time there was about
$50 million in that fund, Higgs said.

In 2003 Attorney General Mike Cox issued an opinion
that the investment was illegal under the Public Employee
Retirement System Investment Act, which says that no
investment may exceed 5% of a fund’s assets.

“They were pushing the envelope. They were getting
overly aggressive, in my opinion. Part of investing
retirement funds is you’re supposed to be somewhat
conservative,” Higgs said. “They were not as cautious as
they are statutorily required to be.”

The suit was filed in Bay County Circuit Court. The
five-member Board of Trustees is being named in the
lawsuit because, according to Higgs, it should have
gotten an independent legal opinion before approving the
investment. The police and fire pension fund covers about
170 retirees and beneficiaries, and about 150 active
employees who pay into the fund.